Chapter 2 Information Systems in the Enterprise 2.1 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise OBJECTIVES • Evaluate the role played by the major types of systems in a business and their relationship to each other • Describe the information systems supporting the major business functions: sales and marketing, manufacturing and production, finance and accounting, and human resources 2.2 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise OBJECTIVES (continued) • Analyze the relationship between organizations, information systems, and business processes • Explain how enterprise applications promote business process integration and improve organizational performance 2.3 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Types of Information Systems 2.4 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Different Kinds of Systems Three main categories of information systems serve different organizational levels: 2.5 1. Operational-level systems: support operational managers, keeping track of the elementary activities and transactions 2. Management-level systems: serve the monitoring, controlling, decision-making, and administrative activities 3. Strategic-level systems: help senior management tackle and address strategic issues © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Major Types of Systems • Transaction Processing Systems (TPS) • Management Information Systems (MIS) • Decision-Support Systems (DSS) • Executive Support Systems (ESS) 2.6 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS The Four Major Types of Information Systems 2.7 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Transaction Processing Systems (TPS) • Basic business systems that serve the operational level • A computerized system that performs and records the daily routine transactions necessary to the conduct of the business 2.8 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS A Symbolic Representation for a Payroll TPS 2.9 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Typical Applications of TPS 2.10 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Management Information Systems (MIS) Management level • Inputs: High volume transaction level data • Processing: Simple models • Outputs: Summary reports • Users: Middle managers Example: Annual budgeting 2.11 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Management Information Systems (MIS) (continued) 2.12 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Management Information Systems (MIS) (continued) A sample MIS report 2.13 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Decision-Support Systems (DSS) Management level • Inputs: Transaction level data • Processing: Interactive • Outputs: Decision analysis • Users: Professionals, staff Example: Contract cost analysis 2.14 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Decision-Support Systems (DSS) (Continued) Voyage-estimating decision-support system 2.15 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS EXECUTIVE SUPPORT SYSTEMS (ESS): • Inputs: Aggregate data • Processing: Interactive • Outputs: Projections • Users: Senior managers Example: 5 year operating plan 2.16 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Model of a Typical Executive Support System 2.17 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS EXECUTIVE SUPPORT SYSTEMS (ESS) (Continued) • Top Level Management • Designed to the individual senior manager • Ties CEO to all levels • Very expensive to keep up • Extensive support staff 2.18 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Relationship of Systems to One Another Interrelationships among systems 2.19 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS Relationship of Systems to One Another In contemporary digital firms, the different types of systems are closely linked to one another. This is the ideal. In traditional firms these systems tend to be isolated from one another, and information does not flow seamlessly from one end of the organization to the other. Efficiency and business value tend to suffer greatly in these traditional firms 2.20 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Sales and Marketing Systems Major functions of systems: • Sales management, market research, promotion, pricing, new products Major application systems: • Sales order info system, market research system, pricing system 2.21 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Sales and Marketing Systems 2.22 SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL Order processing Enter, process, and track orders Operational Pricing analysis Determine prices for products and services Management Sales trend forecasting Prepare 5-year sales forecasts Strategic © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Manufacturing and Production Systems Major functions of systems: • Scheduling, purchasing, shipping, receiving, engineering, operations Major application systems: • Materials resource planning systems, purchase order control systems, engineering systems, quality control systems 2.23 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Manufacturing and Production Systems 2.24 SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL Machine control Control the actions of machines and equipment Operational Production planning Decide when and how many products should be produced Management Facilities location Decide where to locate new production facilities Strategic © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Overview of an Inventory System 2.25 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Financing and Accounting Systems Major functions of systems: • Budgeting, general ledger, billing, cost accounting Major application systems: • General ledger, accounts receivable, accounts payable, budgeting, funds management systems 2.26 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Financing & Accounting Systems (Continued) SYSTEM DESCRIPTION Accounts receivable Tracks money owed the firm Operational Budgeting Prepares short-term budgets Management Profit planning Plans long-term profits Strategic 2.27 ORGANIZATION-AL LEVEL © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Human Resource Systems Major functions of systems: • Personnel records, benefits, compensation, labor relations, training Major application systems: • Payroll, employee records, benefit systems, career path systems, personnel training systems 2.28 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Human Resource Systems (Continued) 2.29 SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL Training and development Tracks employee training, skills, and performance appraisals Operational Compensation analysis Monitors the range and distribution of employee wages, salaries, and benefits Management Human resources planning Plans the long-term labor force needs of the organization Strategic © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise SYSTEMS FROM A FUNCTIONAL PERSPECTIVE Human Resource Systems (Continued) An Employee Recordkeeping System 2.30 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Business Processes and Information Systems Business processes: • Manner in which work is organized, coordinated, and focused to produce a valuable product or service • Concrete work flows of material, information, and knowledge—sets of activities • Unique ways to coordinate work, information, and knowledge • Ways in which management chooses to coordinate work 2.31 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Examples of Business Processes Manufacturing and production: • Assembling product, checking quality, producing bills of materials Sales and marketing: • Identifying customers, creating customer awareness, selling 2.32 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Examples of Business Processes (Continued) Finance & accounting: • Paying creditors, creating financial statements, managing cash accounts Human resources: • Hiring employees, evaluating performance, enrolling employees in benefits plans 2.33 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Business Processes and Information Systems Cross-Functional Business Processes: • Transcend boundary between sales, marketing, manufacturing, and research and development • Group employees from different functional specialties to a complete piece of work Example: Order Fulfillment Process 2.34 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications The Order Fulfillment Process 2.35 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Systems for Enterprise-Wide Process Integration Enterprise applications: • Designed to support organization-wide process coordination and integration 2.36 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Systems for Enterprise-Wide Process Integration (Continued) Consist of : • Enterprise systems • Supply chain management systems • Customer relationship management systems • Knowledge management systems 2.37 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Enterprise Systems • Enterprise systems, also known as enterprise resource planning (ERP) systems, provide a single information system for organization-wide coordination and integration of key business processes. • Information that was previously fragmented in different systems can seamlessly flow throughout the firm so that it can be shared by business processes in manufacturing, accounting, human resources, and other areas. 2.38 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Enterprise Application Architecture 2.39 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Traditional “Silo” View of Information Systems Within the business: • There are functions, each having its uses of information systems Outside the organization’s boundaries: • There are customers and vendors Functions tend to work in isolation 2.40 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Traditional View of Systems 2.41 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Enterprise Systems 2.42 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Benefits of Enterprise Systems • Help to unify the firm’s structure and organization: One organization • Management: Firm wide knowledge-based management processes • Technology: Unified platform • Business: More efficient operations & customerdriven business processes 2.43 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Challenges of Enterprise Systems • Difficult to build: Require fundamental changes in the way the business operates • Technology: Require complex pieces of software and large investments of time, money, and expertise • Centralized organizational coordination and decision making: Not the best way for the firms to operate 2.44 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Supply Chain Management (SCM) • Close linkage and coordination of activities involved in buying, making, and moving a product • Integrates supplier, manufacturer, distributor, and customer logistics time • Reduces time, redundant effort, and inventory costs • Network of organizations and business processes 2.45 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Supply Chain Management (SCM) • Helps in procurement of materials, transformation of raw materials into intermediate and finished products • Helps in distribution of the finished products to customers • Includes reverse logistics - returned items flow in the reverse direction from the buyer back to the seller 2.46 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Information from Supply Chain Management Systems helps firms: • Decide when and what to produce, store, and move • Rapidly communicate orders • Track the status of orders • Check inventory availability and monitor inventory levels 2.47 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Information from Supply Chain Management Systems helps firms: (Continued) • Reduce inventory, transportation, and warehousing costs • Track shipments • Plan production based on actual customer demand • Rapidly communicate changes in product design 2.48 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Customer Relationship Management (CRM) • Manages all ways used by firms to deal with existing and potential new customers • Business and technology discipline • Uses information system to coordinate entire business processes of a firm 2.49 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Customer Relationship Management (CRM) (Continued) • Provides end- to- end customer care • Provides a unified view of customer across the company • Consolidates customer data from multiple sources and provides analytical tools for answering questions 2.50 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Customer Relationship Management (CRM) 2.51 © 2006 by Prentice Hall Management Information Systems Chapter 2 Information Systems in the Enterprise INTEGRATING FUNCTIONS AND BUSINESS PROCESSES: Introduction to Enterprise Applications Knowledge Management Systems • Collects relevant knowledge and make it available wherever and whenever it is needed • Support business processes and management decisions • Also link the firm to external sources of knowledge • Support processes for acquiring, storing, distributing, and applying knowledge 2.52 © 2006 by Prentice Hall